Skip to main content

tv   Bloomberg Markets European Open  Bloomberg  February 1, 2017 2:30am-4:01am EST

2:30 am
guy: you're watching bloomberg markets. this is the european open. your first trade of the cash session coming up. i am guy johnson alongside matt miller. his is what we are watching this wednesday morning. some sugar to go with the medicine. former bossesth and calls for better pricing but his regulation will be eased. we speak to the ceo of road -- roche. deciphering donald. the fed is set to release its
2:31 am
rate. what will officials make of the new commander-in-chief's first 12 days in office? the euro.ting chancellor angela merkel hits back at a top u.s. traded pfizer for saying germany is giving the fx market. which side will the markets take? we are less than half an hour away from the open of european trading after a down day at a close yesterday. futures are pointing to a positive open this morning. the ftse futures and cap futures -- dax futures. cap futures up .7 of 1%. as we saw yesterday, things can turn around pretty quickly. guy: they can. forextake a look at the column. the dollar is rising a little bit. you have the japanese yen down by .41%. the swiss franc giving back a little bit of ground, that it
2:32 am
has been one of the risk trades that we have been watching. let's talk about what we need to know. let's get the details of the session i had. -- ahead. president donald has named neil gore such. scene triggering a showdown with democrats. he would become the youngest justice since cleaners graph clarence thomas joined the court in 1981. in a letter to generate yellen dated tuesday, the vice chairman patrick mchenry wrote, the federal reserve must face all attempts to negotiate finding standards earning american business until president trump has had an opportunity to nominate and appoint officials that prioritize america's best interests.
2:33 am
general electric chairman and ceo jeff immelt warns the time of unbridled global trade is over. johnoke exclusively to mikel three. he weighed in on president trump's travel ban. context,erstand the safety but we think there is better ways to do it. we are not opposed to speaking out on that. yesterday, the president sent out an executive order that said to regulations have to be canceled for everyone that is added. i am all for that. we are sticking all of the negatives. there is some directions he is going and that will be good for business. juliette: global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. guy, matt.
2:34 am
guy: president donald trump met with the bosses of the drug at the white house yesterday. he said he would not set drug prices backing off the worst-case scenario for the former companies. that was some medicine to go with the spoonful of sugar. the shiftd manufacturing to the u.s. despite higher costs. roche seesrugmaker higher sales with its new drug on the market. 50.6 billion at swiss francs, just shy of analyst estimates. joining us now is the ceo. good morning to you. have you spoken to any of your peers that were at the meeting yesterday at the white house, had he been briefed on what happened? guest: i have been briefed and personally i remain optimistic
2:35 am
for the united states. if you know our company is fully dedicated to innovative medicines, medicines such make a real difference for patients and i have no doubt whatsoever that there will be continued demand for such solutions and that the u.s. will continue to reward such solutions. were you surprised that the president was not harder when it came to pricing? that the lifeve sign industry plays a major role thehe u.s. beyond innovations we bring to patients. r --oche, --t rush roche, we have invested and we
2:36 am
biotechned the biggest manufacturing site in the world in the u.s. matt: as it stands right now as opposed to in other countries, in the u.s., you set the list prices for your drugs, rebates are negotiated with intermediaries and the out-of-pocket cost depends on the quality of the u.s. customer 's insurance. if president trump guts obamacare, are you worried that the and user is not going to be able to afford some of your products? again, for us, it is a matter of how much value can we bring to patients. i strongly believe that the price of the medicine should be linked to the value of the medicine. that is why i believe we are well-positioned in the united
2:37 am
states. affordability, it is important to have a well functioning insurance system. i think was ach very good move was to extend insurance for all americans citizens. i would assume that whatever the new system looks like, we will find the solution together in our discussions with the administration to ensure access of our medicines to all american citizens. by: the president talked of streamlining the fda. how much streamlining do you anticipate, how much is your will you find it to clear drugs in the u.s.? when it should say that
2:38 am
comes to true innovation, i have at thegood development fda. we have seen new schemes such as therapy designations which allow to accelerate the approval times for differentiated medicines. and wes room to improve are very happy that the administration puts a lot of making innovative medicines available for patients as fast as possible. you talked about the new facility you are opening up, i am assuming highly educated workers. 40% of scientists come from overseas. one of the issues that was not talked about yesterday was donald trump's immigration order, the travel ban. what do you think about this kind of executive order, how
2:39 am
roche feel about that as a company? guest: we embrace diversity along all dimensions, race, religion. we think that this is very important to drive innovation and it certainly is very important for us as a company. notould add and this is only the case for the united states, this is true for all our sites around the world. we depend on the best people, the best talent, and it is absolutely crucial we can get the best talent from the world to our respective sites where we are. on building on matt's question, how much used to make in the united dates of the h-1b v or the -- is something similar to it?
2:40 am
guest: i could not give you an exact answer on that question. what i know from the past is one of the strengths in the united states has always been that we brought the best talent from the andd to our side -- site development site and manufacturing sites. i hope this will be the case in the future no matter what the mechanics are. guy: this is the only thing the market wants to know about. guess: it is an important read out. it is one of several important readouts we expect in 2017. specifically we expect results in the first quarter. what if you have a failure
2:41 am
of this clinical trial, do you have a plan in place? severalt is one of trials and our guidance pacific lee takes account of the various product launches. the outcome of clinical trials. there are no specific plans linked to specific readouts of trials. matt: what about the diabetes unit under performing for the industry isd the having issues with this kind of treatment. what are your plans with that unit? guest: let me emphasize that diabetes care only accounts for a small account -- part of our business, 4% of total sales in the diagnostics division overall
2:42 am
performs extremely well. we grew at 7% at low key currencies outgrowing the market. it is correct specifically in the diabetes care segment. we have seen a decline across the industry, enormous price pressure. we feel we are well-positioned in this segment. we are the market leader. we remain committed to go through this difficult phase to build upon a new level. matt: so no sale there, you do not want to sell the unit, if i offered you a billion dollars you would not take it. guest: no plans. matt: thank you very much, severin schwan. after the big meeting with resident trump yesterday. he did not attend but u.s. drug makers were there in force. let's go to the bloomberg is this flash with juliette saly. raised itsiemens
2:43 am
outlook after there were better than expected first-quarter profit. the raised profit margin and earnings per share outlook. profit rose 26% in the quarter. apple rosen extended trade after a record quarter with revenue topping analyst projections. sales rose 2.3% to $78.4 billion. sales in china dropped 12%. the only region to see declines. speaking on a conference call, ceo tim cook addressed tax reform in the united states. >> i am optimistic given what i am hearing that there would likely be some sort of tax reform this year and it does seem like there is people in both parties that would favor a repatriation as part of that.
2:44 am
i think that is good for the country and good for apple. the wall street journal reports that apple is weighing taking legal action against trumps travel ban. that is your bloomberg business flash. matt: billionaire ray dalio is more concerned that the effect of the policies may overwhelm the benefits of his pro-business agenda marking a change for the founder of the world's biggest hedge fund who in november was bullish on the incoming president's ability to stimulate the economy. in the daily note to clients, they said the current investment byironment is marked "exceptional uncertainty." they avoided -- recommended holding easy to sell assets. with us now on set is the senior director at blackrock. joining my -- me here is the
2:45 am
chief economy at -- economist at ing. we had a big trump rally initially in equities. obviously, moves in currencies, fixed income, you name it that were positive or sob trump's policies in a positive light. we have seen the protectionist aspects of his policies enacted in this first couple of weeks in office. do you still see or did you ever sees this trump presidency is positive for the u.s. and global economies? guest: we did. they are still being implemented because trump needs the congress. we do see that this is a very inward oriented policy and the detection measures will harm the rest of the world rather than benefit. about politics
2:46 am
and market perception. if donald trump had come out early on and changed regulations , enacting policies that would favor the market he would be perceived as favoring the elite which is exactly what they did not vote for. his net entirely logical, he comes out first of all and he does what will please those people, he hits out at immigration and talks about the kinds of issues that these people have a problem with. as a result of which he is doing what he said. picks easy goals and operates through executive order to start off with. as you know, all along, the complex stuff relating to trade, relating to fiscal reform which are game changers will have to go to congress and that is going to take time. you get a few things out of the way with a lot of unpopularity involved. saying 49%oll approve of the immigration ban. you get that underway while
2:47 am
negotiating some of the more complex longer-term stuff. guy: this is just politics, this is what donald trump is delivering on, delivering on some of the political promises ,e made in the campaign delivering for his base. one can assume he is doing what he said. maybe the market should be patient. the question is whether he can get congress to go along. -- now you need congress to be the game changer for economic policies. i sometimes get the impression you can draw parallels with greece although it is a bit unfair. we heard a lot of intentions from the government and found a policy implication is a totally different thing than we were used to.
2:48 am
about, if wehink assume that donald trump can get everything passed he wants to, isn't so good for the u.s. economy to be so inwardly oriented, it is not is exposed to foreign economies as others but is this protectionist slant the right angle? guest: i am not sure it is. like the border adjustment tax is stepping up in terms of popularity with the administration. its defenders say you can offset inflation through an appreciation of the u.s. dollar. if you appreciate the dollar ,hen you will impact exporters it is not a zero sum game. that is the complex [inaudible] the first month of the year has gone by. we see the cyclical assets, emerging-market equities have led the way. the dollar has been a bit weaker
2:49 am
and assets have not been as strong. what the market is saying is the global reflation story as this is a global story, everyone -- in europe things are stirring and in japan things are stirring. we have to look at the global reflation story other than what is just happening in washington. does not haveump a good -- a full cabinet yet. guest: some people take the view and i am not sure i would be an expert. when he has a full cabinet, a number of those members who are very strong minded people in their own right will be in place to try and temper some of the slightly under planned announcements we have seen so
2:50 am
far. sort of if that is headless optimism. without a cabinet and without having congress, a lot of the stuff that has to be done is not going to get done yet. we will see the fed today reflecting that in their statement. they will say something about fiscal's coming along but we do not know what it is. it is a bit of a wait and see mood. the: when you look at executive orders that come out, we have heard from currency traders that this may hurt from equity -- this may hurt the the brand cannot be is relied upon. what do you think about that diminishing of investors' confidence in the u.s. economy? >> it is unpredictable. especially if you get these -- this back-and-forth, if you do not know if the entire cabinet
2:51 am
trumpsding behind executive orders. we have seen officials step down and we have changes in the cabinet quickly. the predictability and credibility of politics in general is in danger. matt: we will talk about, obviously trump permeates everything. even as we turn our focus to the fed or the european economy, we will weave that in. you're going to stay with us. we are minutes away from the open. we take a look at the movers in today's trading including siemens as the german engineering unit raises its full-year outlook after profit beat estimates. this is bloomberg. ♪
2:52 am
2:53 am
2:54 am
guy: welcome back. let's talk about some of the stocks we are watching. let's get to switzerland and talk about how roche will open. bee asding may not have stronger -- been as strong. we spoke to the ceo about what the unitedg in states, talking about talent and diversity and how he hopes the d.s. system will rewar innovators. here's the price target up
2:55 am
there, the current price to 33. mr. schwan may have a little bit of work to do if he is going to please the analyst. matt: absolutely. let's go northeast, north and very east of oslo to munich. siemens yesterday raised its full-year profit outlook, sales and orders, morgan stanley saw a little bit light but says operating profit well above expectations and margins and margin forecasts very strong as well. also this company is getting set gym's not a from sap in as its chairman or head of the supervisory board. a lot of interesting moves on siemens and investors may bid the stock up at the open. because to break now the market open is coming up in just four minutes. futures are pointing up after the drop yesterday when we can
2:56 am
-- we saw yesterday how quickly things can turn on a dime especially if currencies move. we will pay attention to all of it. this is bloomberg. ♪
2:57 am
2:58 am
2:59 am
>> good morning. i am guy johnson. matt miller is in berlin. guy: matt has your morning brief. to go with your medicine. trump meets with from a bosses and calls for better pricing, but says regulation will be much ease. d we talked with the ceo -- eased. we spoke with the ceo who wants to attract talent to his facilities. the fed is set to release its rate decision at 7:00 gmt. what will he make after his first 12 days in office? exploiting the euro.
3:00 am
chancellor angela merkel hits back at a top u.s. trade advisor, saying germany is gaining the fx markets. what side will the market take? we will look at that action today. we saw a lot of action in currency markets yesterday, and that really steered the equity markets. manus: matt, we are expecting a positive start. guy: this is what we could see on the screen. london is up by .3%. it is going firmer. the market getting the market up and running. .8 percent, aby fairly strong start for european equity. manus cranny, over to you. resets, re-trade. equities in europe and around the world are buying off the lows when they see a president do what he said he would do. we lost a little bit of cell you
3:01 am
yesterday. don't forget, we dropped to the lowest level in almost one year. french risk is rising as well. again.back in the news how much did he pay his wife? 11 days into the 100 day trump over at bridgewater, questioning the kind of person you are getting. now, the past 24 hours has been all about lambasting any currency you can get your hands on, whether it is the yuan, the yen, or the potential trade advisory. he is calling and lambasting the euro. is the euro undervalued? have a look at this. the euro is anywhere between 5% and 25% undervalued according to the oecd, by four different metrics that they use. this currency is the most undervalued of any of the g 10 according to the data produced by the oecd.
3:02 am
therefore validating the proposition from navarro that the euro may be undervalued. response has been is moot. somebody want to have a chat with me? i will do what you are supposed to do when you're sitting there on your desk. i will take my ib chat off. it might not happen. we will get there. there we go. it is all about the dollar, as you can see. the dollar has gone from being perhaps the strongest trade of all to the worst start to trading for the dollar on record . so for this year, we have flipped it around. there you go. the interim attorney general was fired. trump blasting the stronger euro. aboutthe triple, reacting, resetting, and retreating. nejra cehic has a couple of stocks to watch. i'm off to radio. join me there with caroline. the stocks tove
3:03 am
watch and while i am a during radio, ii am anchoring try to pick some of the boldest calls for you. humans moving somewhat in siemens moving somewhat in line with that. better than expected profit. even though we have this improved financial outlook, it is contrasting with the more subdued tone about executives talking about future orders. the cfo saying the company has to fight for every order amid intense price pressure. projects are being deferred amid political uncertainty. the ceo said they are trying to send a clear signal and it looks like the market is buying in. right now.up bald man's right now. although up 7% -- volvo up 7%. increased onand
3:04 am
the one hand and north american demand shows some signs of stabilization. the world's biggest maker of commercial vehicle is at the open and electrolux, lower than 3%, appointing a new head for its major appliance business in latin america. we have numbers from electrolux and that is largely what the stock is moving on today. guy. guy: thank you very much indeed. let us talk about one of the big events we will all be waiting for that are on. let us go to the states again. the federal reserve's fomc concludes with an interest rate decision which will be announced at 7:00 p.m. u.k. time, 2:00 p.m. stateside. the first fomc meeting since president trump took office. the lack of detailed policies from the new administration means fed watchers are not expecting any news today. with us, senior director of blackrock, chief economist at
3:05 am
imd. it is rolling over. this may be should cause the fed to think about the marked time here. at,hat the market will look guy, is what they say in the statements, the mapping of the roadmap to rate rises later in the year. isond thing i want to say the voting machine, not a weighingmachine -- machine. people are more optimistic now. our own analysis looking at the , scraping websites and so on for activity, suggests the u.s. economy is expanding pretty nicely and better than consensus. we are going to have a pretty balanced statement today, particularly, anything about
3:06 am
fiscal, it is going to be too soon to tell because we have not seen the details. guy: what do you think the fed will deliver later on if we take a look at the five-year five-year forwards? it suggests that it will get there within that period. the trumpflation story. i think what we will see here is wouldhe u.s. economy accelerate even without trump and that the fed will probably prepare markets for another rate hike. he second one in the course of the year will depend on whether trump started lamenting his fiscal stimulus. matt: is there any risk in the fed making some reference to trump's policies in a statement or do you think they will completely stay out of it? carsten: there's nothing they can assess. orders havetial hardly anything to do with economic implications so they will really have to wait for his fiscal plan before they can
3:07 am
react. matt: i mean, is there a chance the the fed tries to weigh effect of his fiscal plans ahead of time? they did seem pretty bullish. some members of the fed we spoke with the last couple of months on the possibility of tax reform, of infrastructure spending, of deregulation. is the fed pricing that in? .arsten: i mean, wait and see it is less around what is on the backside of the equation, the degree to which it is funded or unfunded. unfunded as it were, with a deficit blowout, is proportionally more inflationary, clearly, then it is funded. a -- than if it is funded. they noticed that reform is coming, everyone knows that, but nobody quite knows the beats. look at here is more things like u.s. average earnings, which guy is putting
3:08 am
up now. this is the reflationary cycle where earnings rise, spending rises, and you get into a virtuous circle, which for a long time, the u.s. world economies have not been in, so i'm showing quite strong numbers now. yellen's is janet employment. >> she is a world-class labor economist, first and foremost, so why is she not stepping up and signaling more clearly that march is on the table? >> they are prepared to let the economy run hot for a while because they do not want to kill the thing again. so i think that this is going to be the narrative, the continuing background nejra cehic ago to the first half of the year. the u.s.close -- clearly does not have, by most metrics, anything of an output gap really.
3:09 am
how close you hot are we now? carsten: i think if you look at kind of other data from the labor market, if you look at on voluntary part-time work and employment -- involuntary part-time work and employment, people still looking for a job or people even having given up looking for a job, these numbers are still higher than at the start of the crisis, so there is still some time to go before the labor market is really overheating. it there.ll leave we will come back and talk about the euro, one of the critical factors for the trump administration. still to come, merkel standing up for the trump administration on the single currency, rejecting the accusation that germany is a currency manipulator. we will talk about bats bat next. -- that spat next. iphone ithe program, nk. is it back?
3:10 am
three consecutive quarters of decline. what next for the world' biggest companys? ♪
3:11 am
3:12 am
matt: welcome back to the european market open. i am matt miller in berlin, guy johnson with me in london. we are looking at gains across the board. the ftse up two thirds of
3:13 am
1%. the cap, no slacker. after a turnaround yesterday in markets from green to red, we are solidly green. guy, what is driving these moves? guy: let's find out, matt miller. siemens is a big factor in the mix. we have the siemens numbers, really allowing the company to deliver on the front foot this morning. that is the biggest index factor here. this is index points for the stoxx 600. bva, banks,, b shyer, all in the mix. it is interesting what is happening on the other side of things of what we are watching. enough,ux, funny interesting compared with yesterday. --e of the banks
3:14 am
matt: speaking of europe, here in germany, chancellor angela merkel rejected an accusation by president trump's top trade advisor that germany is gaining in the fx markets. she says the euro exchange rate was the providence of the ecb. that hasy is a country always supported the idea that the european central bank policy at the same way that bundesbank did at the time when there was no euro yet. we will not seek to exert influence over the ecb. us, ewenll with cameron watt and carsten bresky. what do you think about donald trump administration's assertion that germany games the fx market? a certain irony to
3:15 am
it that the germans are the greatest critics of the ecb's policy, that the outright monetary expansion, which contributes to the currency, so a little bit of an irony, but also a kernel of truth which is that germany runs its surplus with the rest of europe, internal surplus, and this is the rebalancing, which many people feel should have been undertaken, and wonder about the refusal to expand fiscally in germany. en, what do you think about it? donald trump is surely unhappy about a stronger dollar may be hurting his exports, making it cheaper for americans to buy foreign goods cheaper. carsten: that is the funny thing, the irony of the germans deeply regretting that they do
3:16 am
not run the show at the ecb anymore and donald trump also staring off with confusing messages. on the one hand, maybe you want to protect his own economy, does not seem to give a lot about the u.s. export market, but at the same time, he wants to get a weaker dollar. this is why he is criticizing europe, why he's criticizing germany. out germanylling for gaming the fx system is really an attempt to jawbone the dollar down. carsten: it is also another one to create confusion with a former trade partner and former diplomatic partner. europe does not know how to react on it. guy: i think that is a really interesting point. is it an attack on the single currency or an attack on europe, discord? sow there is a sense in europe that donald trump's anti-you. is this heart and parcel of this process?
3:17 am
if you were french, would this make you more wary of germany? is this more politics than economics? carsten: it is more politics and fits into comments we had from the u.s. ambassador to the e.u., showing i think, for this current u.s. administration, trade is really business, and partners, but a lot of them are competitors. if you look at the european single market, it is bigger than the u.s. single market, so if they can sow confusion, achieve more on dismantling of e.u., e.u. further disintegration, you want competitors down, so that would be perfect and good for the u.s. economy. guy: it is sort of schizophrenic. a sort ofe's schizophrenia and what the americans are saying. on the one hand, they are saying, the e.u. is not a great
3:18 am
construct, the euro is not a great constructs. and on the other hand, they say it is too cheap and being manipulated. imagine a world in which there was any contemplation of a euro breakup and imagine where the dollar would be, where gold would be, and where the euro would be. there is a drawing going on. the euro is down 2.7%. there is a lot of schizophrenia in terms of conflicting ambitions and what america is saying. guy: this goes to the heart of the idea that the u.s. administration prefers bilateral. it does not like the multilateral rules-based system that operates. you can see it with nato, other international organizations as well, and i guess the e.u. gets lumped in with that concept. >> be careful what you wish for. the financial instability created by messing with the mind and the unity of europe is a very high-risk strategy. and awe are going to talk
3:19 am
moment about the u.k. economy and i feel like we spent an awful lot of time talking about the u.k. in financial news, even though they have 25% less people than germany during what do you think about the state of the german economy right now? it does not look good if you have to rely on domestic consumption for germans, right? germans don't like to buy stuff. >> we are at the end of a very positive cycle right now. economy ise german doing what the u.s. always told them to do, to be more dependent on domestic demand. we have the missed opportunity to introduce new reforms and more investments. matt: hopefully we get to open shops on sunday a little bit more. thank you for joining us, carsten brzeski. we are going to talk about the u.k. and you will say with us through that discussion. you and ewen cameron watt will talk about the brexit as well.
3:20 am
first word news with sebastian salek. sebastian. sebastian: president donald trump has named neil gorsuch such as his pick for supreme court. a showdown with democrats in the senate. the youngest justice since clarence thomas joined the court in 1991. a billionaire says the damaging effects of trump's populist policies may overwhelm the benefits of his pro-business agenda, which marks a change for the world's biggest hedge funds. in a daily note, they said the current investment environment is marked by "exceptional uncertainty." they recommended avoiding concentrated bets and holding easy to saw assets. a key u.s. maker wants the u.s. to halt talks over its national agreements until president trump have had a chance to review their work. the fedter dated to
3:21 am
chair, they wrote the federal reserve must cease all attempt to negotiate a these standards until president trump has had an opportunity to nominate an official for america's best interests. a general electric chairman ceo warns unbridled global trade is over. he spoke exclusively to bloomberg news's editor in chief. he weighed in on the travel ban. >> we understand the context, safety, but we think there is better ways to do it. we are not opposed to speaking out on that, but you know, yesterday, the president sent out an executive order that said to regulations have to be canceled for everyone that it added. i'm all for that. all in the negatives without standing back and saying, look, there is directions he's going in that are going to be very good for business. sebastian: global news, 24 hours
3:22 am
a day, powered by more than 2600 journalists and analysts in 126 countries. this is bloomberg. guy: thank you very. a vote on the law to trigger brexit will be held later this evening and lawmakers in the united kingdom will return to the comments for further debate, following yesterday's session, which lasted 11 hours. anna edwards is in westminster. even if the bill gains enough be the first this urdle for theresa may? anna: this is one of many hurdles, i suppose, guy, but in terms of getting this article 50 brexit bill through, it looks as if it will pass. the government has a small but workable majority in the house of commons, and there will be rebels on the labor side and conservative side, but it looks as if it will pass. yesterday, the debate went into night.dle of the we heard an outpouring of emotion from various members of
3:23 am
parliament. let us listen to what they had to say. tothere must be no attempt remain inside the european union, no attempt to rejoin through the backdoor, and no second referendum. the country voted to leave the european union, and it is the duty of the government to make sure we did just that. >> the british people did not vote to make themselves poorer by putting ourselves out of the greatest free trading single market the world has ever seen. >> what is it about having power back in our parliament that they cannot stand? once ander, the future sovereign parliament of the united kingdom votes to make it sovereign again. that is what the people of challenged you to do. the membership of the european union restored to us our national self-confidence, gave us politically able in the role in the world as a leading member of the union which made us more valuable to our allies. >> i think a new, modern, 21st
3:24 am
century economic, liberal democratic structure, which would give us that democracy and peace, and that is why i hope everyone will vote for triggering article 50. anna: members of parliament from both sides of the aisle from various party, making their sides known and crucially, some of the conservative mp's on theresa may's own side making it clear how much they want to tie her hands in the negotiations and make sure she comes back to theirment to seek thoughts during the process of negotiation. be aware, my ministers questions and no doubt, donald trump and his future visit, his future planned state visit to the u.k. will be a topic of conversation after 1.7 million people signed the petition to say he should be stopped from making that estate visit. the involvement of the queen seems to be the controversy there. na edwards covering that. ewen cameron watt and carsten
3:25 am
brzeski. the biggest bear trap strikes me that theresa may has to avoid here is having a meaningful vote on the deal that she is negotiating. how does she avoid that? ewen: today is not a meaningful vote. today is going to be the past commons will pass the bill pretty clearly and we move forward from there. whatever will come in the details -- the devil will come in the details in the next 18 months in terms of what is involved particularly on the trade side, but the prime minister center dot pretty clearly, whether you like it or not. there were strong voices on both sides of the debate yesterday. the quality of the debate was extremely high, but it is what it is and we are moving forward with it. businesses and so on will get used to it. you are seeing investment banks saying we will move people because of passporting. businesses just a just to this
3:26 am
and get on with it. matt: is the european economy kind of rubbing its hands, getting ready for some of the school oil -- some of the spoils of brexit? will it be positive for some economies? carsten: to some extent it is. in the long run, we'll see the u.k. economy is simply too small and there will be some fallout , people moving to continental europe. europe is rubbing its hands in terms of economic impact. political impact is so uncertain and when we see copycatting of populists in the national movement in other countries, that is what europe is afraid of. goodwe lack in europe is a proactive strategy, so europe is still very reactive, instead of coming up with a really forward- oriented strategy on how to deal with brexit. matt: that is a key problem. they do so much for joining us today, carsten brzeski. ewennd cameron --
3:27 am
cameron watt, from london. guy: up next, we will talk about apple/mac. is the iphone back? this is bloomberg. ♪
3:28 am
3:29 am
i've spent my life planting a size-six, non-slip shoe into that door. on this side, i want my customers to relax and enjoy themselves. but these days it's phones before forks. they want wifi out here. but behind that door, i need a private connection for my business. wifi pro from comcast business. public wifi for your customers. private wifi for your business. strong and secure. good for a door. and a network. comcast business. built for security. built for business.
3:30 am
guy: welcome back. watching bloomberg markets. this is the european open. a positive session for european equities. some of the drug stocks, some of the industrial stocks are really moving the markets this morning. let us find out what stocks. the marketsmoves in today. the best performer on these stoxx 600 and the world biggest maker of commercial vehicles, volvo up more than 6%. this is partly because european demand increased, but also because north american demand showed some signs of stabilization, so volvo have
3:31 am
risen the most since and hit their highest level since april 2015 in the session. julius baer reported earnings ahead of estimates as new money and investment growth boosted as sets. that means the shares jumped to the highest in more than one year. earlier today, we spoke with the ceo of julius baer and asked him about the outlook in the u.s.. >> we can interact with our clients and show them investment opportunities as this entire thing is translated into the provincial of trading. not yet. there is lots of cash on the sidelines, waiting for a clearer direction of how the u.s. will interpret its global theme. nejra: i'm taking a look at in the men's, europe's biggest -- at siemens, europe's biggest engineering company. we have seen the shares hit the highest since 2000, after onmens raised its outlook
3:32 am
digital services, which lead to better than expected first quarter profit. this is even as the company said that orders are starting to weaken, so a bit of a twofold message, but nonetheless, investors on the positive. matt. matt: thanks very much for that. general electric chairman and ceo jeff has spent his career writing the great wave of globalization. in an interview with john nickel weit, he predicted the time of unbridled trade is over. >> philosophically, we believe in the free flow of goods, and inherently, we do not things like walls are good ideas. let us put that -- so that is maybe the background. i would say that there is nothing wrong with president trump wanting to add manufacturing jobs in the united states.
3:33 am
the president of china wants to add manufacturing jobs. the president of china wants to -- of mexico want to add manufacturing jobs. we helpnk that how do exporters and find ways to help exporters? i think that is a good thing. >> you said his aim was to increase revenues that was doing something that would cause problems for that. you would criticize that? >> i am for trade. i'm trying to do is, look, -- >> you are sympathizing to his aims but -- >> the media want to drag every negative down to the ground. what is his goal? his goal is to drive manufacturing jobs in the it is good for people like me to look at it and understand it. it is not a bad thing. >> the symbol of american manufacturing. you are doing these things and no economist thinks this will help you. >> i believe that when you stand
3:34 am
back, being able to have trade but for thee thing, last -- >> you are being diplomatic. ago, ithe last 20 years is not like chancellor mcm merkel, where like, or president from china, it is unfair to just target some of the actions of -- some of the comments president trump has made. we believe in trade. product inwe sell mexico. we import -- we import $3 billion of product from mexico. that is a good thing. it is good for the united states and mexico. we want to keep articulating that, but look, i think somehow, the role of people like me is to try to navigate between the two and hopefully bring them together, versus just joining one side of the argument that is already quite strong.
3:35 am
>> you are on the manufacturing counsel. >> i was also on president obama's jobs counsel, so i think -- believe me, i did not agree with everything president obama said either. >> what about the relationship with china? one less thing on that. is the prospect of any kind of trade dispute with china, does that bother you at all? >> it does, not just in the ge contacts, but the economic context as well. there is no good argument to be made for the two biggest economies on earth to be in a trade war, a bilateral relationship between the u.s. and china, that is significantly important. for the whole world. and so, that is one that i would be very strong on. >> and you have a very good contact in china. the think the administration is not estimating how much pressure the chinese are under? >> they need to. the chinese are good.
3:36 am
they have a worldview just like we do. thei would say that president is smart enough to understand that ultimately, trying to find -- even though we are going to disagree on things -- having some kind of bilateral day in, day out relationship between the u.s. and china is critical. jeff: now i think he is a smart guy. he will see that. immelt looking at the big picture. that is his take on what is happening. let us talk about another massive company. apple shares up in extended trade off or its sales figure b estimates overnight. the company sold a record amount of iphones in its fiscal first quarter. 78 million units. that made up almost 70% of the company's revenue. it came as a bit of a surprise. joining us now is the managing director. good morning to you. i want to start with the
3:37 am
politics. we will deal with the mechanics in just a moment. trying to take a balanced view of what is going on at the moment. the tech industry is not. if i am an owner of such shares right now, of apple stock, do i need to worry? >> i think, absolutely. there are a number of really quite astonishing factors that when you see the management, the ceo level of the top five tech companies of the u.s. which represent $2 trillion of market cap, effectively uniting in newsition to a very government policy, i think that that's a president given that you have many other battles coming ahead on that utility, on cyber security, lots of other things to be resolved for the interaction between these incredibly important tech companies and incredibly influential companies and the new ministration. ay: do you think there is danger that the administration takes a last benign view?
3:38 am
net neutrality will be a big factor in all of this. richard: there is a huge risk that is difficult to quantify install prices. let us put it this way. companies are sticking their heads out of the parapet. they are not being shy about their values. substantial growth in the equity market that overall economy. to turn around and to ding these companies is to do a big disservice to the u.s. economy. matt: richard, what is the danger to president trump? i have seen stories that amazon an is challenging the executive order on immigration. much can they possibly fund opposition to president trump and do you think they will bring their full weight to bear? richard: i don't think any of these companies want, as a full-time job, to be in a battle with the u.s. government. i do not think they see that as
3:39 am
a productive use of their capital and their resources. they would much rather get on with bringing innovations to is a and i think it delicate balance right now, but obviously, this has been a tremendous and really unprecedented first week, and to see that senior management of all of these companies are so completely united when usually they are at war with one another is also unprecedented. quarterple has a record , sells more iphones than ever before, and yet, this is a decade-old product, richard. is talk about innovations -- tim cook overseeing any innovation at apple or do they just have cash cows now? greatd: that is a question. several of the big questions that did not really get asked on apple's conference call, which analysts toseven ask questions, one of them is they spend $10 billion on r&d in the last fiscal year, rising to
3:40 am
$12 billion. what are they seeing from it? a second is they can talk about the services business, which is growing very nicely, 90% of sales. it'll take a long time even if they double the business to kind of have the outsize impact the iphone has. if you look at the other category, they did better with s, less well with ipads, but nothing that really grabs attention. this quarter had not only an extra week, but it was a quarter where samson was really -- to put it mildly -- in the penalty box. i think you can expect quite aggressive competition in the smartphone space next year, this year. everyone knows apple is coming with a new advice in the september timeframe, and i think samsung will be much better prepared to address that when it comes with its galaxy s8. guy: how much of that money is being spent on cars? richard: we don't know. one of the issues across tech companies right now, disclosure
3:41 am
has gotten worse. apple reports freight business with $200 billion in sale, five segments. they give very little breakdown of any other segments. and they have removed a number of items of disclosure over the past few years. it is my view that more transparency with these companies would help them achieve higher multiples command right now, apple trades below a market multiple, which is astonishing given the growth it has delivered in the past. what is clear is that with the iphone, it is basically a cyclical company. it has had a phenomenal growth year in fiscal 2015, and then shrunk a percent in its fiscal 2016. i want to come back and answer the question to wrap this altogether. is apple and innovator anymore -- an innovator anymore? the concern is it has gone -- that it is microsoft. if you want to own it for
3:42 am
that, fantastic. is apple and innovative company? they have changed direction on a number of occasions, entire market on a number of occasions. why do we not believe they can do it again? is it tim cook? is it the fact that we do not have a management team capable of driving that? try and explain what is going on. ishard: one element of it apple's incredibly secretive culture and a very thoroughly adamant management team. stagnantairly management team. when they buy a number of small companies, they spent 17 billion dollars in opposition. they have not been able to put it on a big bet outsiders up of interest or scope of competence. so the big question right now with 150 and billion dollars of net cash, $73 billion of debt sitting in the u.s., will they put that capital to work?
3:43 am
can they buy a business that would be -- that they could fold into their secretive culture, which does not really fit the way one does innovation? ec see interestingly the way which google and facebook in just companies, people leave the company then start new companies, and they create a network. that does not happen in the same way with apple. cars guys question about is key here. when cars are self driving, we are going to spend all of our time in them, communicating, shopping, consuming content. is -- does everybody at apple, are they clear that the car is their next big thing? the personal computer than the mobile home, and now the -- mobile phone, and now the car. correct? richard: in a word, wrong. i think the market has been obsessed with cars and self driving cars and the role of the
3:44 am
technology companies in cars almost to the point of -- it is almost comical at this stage. it will be many years until you have full level five self driving cars. i think, you know, that is widely recognized. i think there is no way you are going to sweep aside a trillion dollar auto industry. guy: if it is not the cars, what is it? richard: what apple needs to get in the game with is the kind of personal assistant, artificial intelligence-based services that you have coming from amazon, coming from google, and some sort of consumer-based services. apple reference 150 million subscriptions, but that included third-party services and they you subscribeif to netflix and spotify, you are two of those numbers. their distribution platform is tremendous, but they are under utilizing it. they need to do more with services in the home, just as
3:45 am
they cited on the call, that you do not see in real life. i'm not sure there is another single tech product in a category if you look back at all the wildly inflated claims about wearables from all the investment banks from 2013 and 2014 and look at their fitbit and gopro ipo's they brought to you. those have not worked out so well, so how many people have you seen wearing the year bonds from apple -- the earpods from apple? guy: not many. richard: it takes time and it is very rare and it may not be the place you need to look at apple for innovation. guy: really interesting conversation. thanks for taking us around what is going on in the tech space and the politics around it. richard kramer. up next, the first fed decision of the trump era today. rates are inspected to stay put, but what effect will the president's actions have on the fed's future policy? that is a discussion we will have next.
3:46 am
these two people, front and center. this is bloomberg. ♪
3:47 am
3:48 am
matt: welcome back to bloomberg markets. this is the european market open. i want to turn to the fed right now. we will be talking about it all morning because the fomc is due to release its rate decision at 7:00 p.m. u.k. time. here is bloombergs mike mckee with a preview. mike: the economy is strong and
3:49 am
inflation so signs of creeping higher, but there are no details available for president trump's economic policies. economists and analysts say we will not see the fed move t this meeting. themedian of the fed december dot plot suggested as many as three rate moves in 2017. officials have warned they are not on the kind of preset meeting by meeting schedule we saw from 2004 2 2006. instead, expect the central bankers to signal they want more time to evaluate the economy and trump's impact on it. taxn the possibility of cuts, infrastructure spending, and trade wars, they do not know if they will have to speed up the pace of tightening or go back to cutting rates. they don't really's new economic forecasts at this meeting nor is there a conference by janet yellen, so look for little more than a bland statement and knowledge in the economy's progress that does not offer any timetable for action. michael mckee, bloomberg, new york. in the globalring
3:50 am
head of rates research at bank of america merrill lynch. ralph, let me ask you bluntly how much you care about this meeting. mike seemed to downplay it a little bit. is it going to move markets? .> it might i think we are still underpricing probabilities for march if we get a good deal, we will get support, and if we get a good labor market report at the end of this week, the march probabilities could be higher. a strongt will send signal. what we get is small tweaks in in theguage that -- prepared statement, and what i find interesting though, is that if you look at yellen's speeches from a couple of weeks ago, they continue to make the case for a few rate hikes, which is more than what we are currently pricing in and they make on the basis of the current outlook without taking into the
3:51 am
account the fiscal stimulus we are waiting for. come so, if they do through on that promise with more rate hikes than your pricing in, is there a possibility they will ever move rates at a meeting when there is no press conference, because we have kind of been led to believe so far that that is not an option, that these meetings are live. ralf: we are getting a little bit ahead of ourselves if we are starting to talk about rate at our pressings conferences. i think we are at a quarterly schedule at most. our official forecast is only forhike this year and three next year, so we are looking at one and three as opposed to two and two, which is what the market is pricing. there is the advantage of being able to talk about risks to what the market is pricing, so in that sense, if we do start revising up those probabilities for march, then we also need to
3:52 am
advise the possibility that we get closer to three and three rather than to m2. two.-- than two and guy: i'm using the bloomberg here, rather than the fed funds. 34% for march. what? should that number be, do you think?the market is underpricing by how much ? ralf: should be closer to 50-50. guy: let us talk about what we think the fed is watching right now. i was going to take you to the average earnings. there is a whole bunch of metrics we can use. janet yellen is a labor market economist. earnings are starting to creep higher and inflation is going up as well, but let us talk about earnings. surely she's looking at this and going, time to go. if you listen to yellen, it is clear that we have lost a lot of the dovish biases we had
3:53 am
over the last couple of years. she made a strong case in her recent speeches, and the labor market will play a key role. it is not just earnings. if you look at the rate as an example, broader based measures of unemployment, they do all , a plethora of circumstantial pieces of evidence that all point to a reasonable improvement in the labor market that does arguably rate policy. guy: donald trump economic policies? ralf: i don't know. ofhave to work on the basis what we currently know, and we currently know that the labor market has continued to improve. we know that small business confidence has picked up election.ince the
3:54 am
we know consumer confidence has improved despite yesterday's fall. i think there is scope for current conditions to ease given the talk about having regulation, and we still have leading in the indicators. again, chicago pmi is slightly less exuberant, but overall, new orders have remained very robust, so on the basis of that, there is a scenario where animal airits continue to provide lot of support for trump. you may be very lucky. one of the things that i find interesting, donald trump saying that germany is gaining the fx market as he does not like dollar strength against the euro. if the fed continues to raise rates, if they raise rates as much as they say they are going to, doesn't that just lead to a stronger dollar and want that make down to more unhappy with the federal reserve? ralf: yeah, i think some of your
3:55 am
previous commentators this morning have artie pointed to some of the internal contradictions we have. on the one hand, trump has been criticizing the fed for its low rate policy, but on the other hand, he does not seem to like a stronger dollar, and at some point, he will not be able to have it both ways. i think for now, we view the higher rates trade as what easier them a stronger dollar trade, and i think it is important to remember that what we are seeing is actually a summer dollar as opposed to a weaker euro, so i think europe -- stronger dollar as opposed to givener euro, so i think who we tend to exports to, which is capital goods to currencies gged,can be dollar pe and commodity producers, there is a negative headwinds coming from the dollar strength, even for europe. ,att: he has on the other hand
3:56 am
janet yellen and other central banks, done them a favor, to steepen the yield curve and brought back inflation. some economies may be on the brink of deflation. do you think in some sense the fed is thankful? jim bullard seemed to be excited when he was coming in. um, i personally am very skeptical of this whole .teepening is good argument it is good for bank earnings and if i look at bank of america's shareprice amongst others, it has not done us any harm, but if you look at the ecb minutes as an example, they really struggled to make a sound argument for why a steeper rate curve will help them achieve their inflation target, and so, livest has made investors easier years, but beyond that, i'm not so sure. guy: you are going to stick
3:57 am
around and join matt and me on digital radio as we build up to the fed meeting. ♪
3:58 am
3:59 am
4:00 am
♪ >> navigating the unknown. the president prepares for the first rate decision. what will it make of trump's first 12 days in office. bloomberg is told the old days are over and many have got it wrong on globalization. -- globalization from 30,000 feet at a resort or townhouse or think tank don't know a thing about how globalization works. it is country by country, deal by deal. i wish it was all

22 Views

info Stream Only

Uploaded by TV Archive on